Extended family members who care for children who are not their own will get an extra $35 million in benefits, the Government will announce today.

More than 12,400 kids in New Zealand are cared for by relatives, often grandparents, when their parents are either incapable or unwilling to raise them, often due to drug use, violence, neglect and mental health issues.

Around 8500 foster parents already receive an unsupported child benefit, with the Government paying out about $111.5m between July 2011 and July 2012. But many say the money is not enough.

Social Development Minister Paula Bennett said today's funding package would include a one-off establishment grant of $350 when a carer takes a child into their home. It would also include a "start-of-year payment" that will range between $400 for kids under five and $550 for children over 14 to relieve caregivers having to buy school uniforms and pay fees.

The ministry will also set up a discretionary extraordinary care fund of up to $2000 a year for children with significant difficulties, or who show promise. This fund will become available in July 2014.

That money would be used toward specialist help, like counselling or special needs. It will also go towards funding children who show promise in activities like music or sports.

Bennett said many carers were doing a tough job on limited incomes and the cash injections would help them manage.

"Some of these children have suffered abuse or neglect or the death of a parent and other family members who step in often find it both emotionally and financially challenging," said Bennett.

Bonnie Williams, a support group co-ordinator for Grandparents Raising Grandchildren Trust NZ, said the money would go a long way to helping grandparents on limited incomes.

Williams, 69, has been supporting her intellectually and mentally disabled 20-year-old granddaughter since she was a baby.

"People like me aren't going to reap a lot of the benefits with the new stuff, but over the years we have spent our life savings on supporting our grandchild. The stresses are huge on families," she said.

"Money is a big thing because our children need counselling, special needs help and special education."

Williams said many of the kids in care had never known new clothes.

"They've never had new stuff in their lives. They deserve it. They need help in the schooling system. They are different. They have no self-esteem, they have dreams and aspirations like every other kid and their dreams and aspirations don't get to be fulfilled. That's not fair."